Optimal wage indexation with exchange rate uncertainty in an oligopolistic and unionized economy

Optimal Wage Indexation

Indexation clause is introduced in a dynamic general equilibrium model with nominal wage contracts. We Þrst look into the optimal degree of indexation and then its effect on the business cycle. We have found that the optimal degree of indexation is around 50% with little vatiation with the contract length. Indexing the wage contract optimally makes the business cycle in the model economy much c...

an appropriate model for exchange rate predictability in iran: comparing potential forecastability

nowadays in trade and economic issues, prediction is proposed as the most important branch of science. existence of effective variables, caused various sectors of the economic and business executives to prefer having mechanisms which can be used in their decisions. in recent years, several advances have led to various challenges in the science of forecasting. economical managers in various fi...

Optimal IPO Timing in an Exchange Economy

We model the IPO decision of an entrepreneur in an exchange economy. The entrepreneur holds a Lucas Tree, and when the IPO occurs, the market converges to a Two Trees economy built on Cochrane, Longstaff, and Santa-Clara (2008). We solve the optimal timing problem and study the diversification effects over the firm’s value and entrepreneur’s consumption. The model predicts that IPOs should be c...

Exchange rate fluctuations in an economy with noise traders

This paper analyzes the stability of the exchange rate in an economy with noise traders. Noise trading is restricted to agents investing in the domestic stock market. The agents pricing foreign exchange hold rational expectations. Monetary policy is affected by the behavior of investors in the domestic stock market and in turn affects fundamental stock evaluations as well as noise trading. We s...

The Appropriate Exchange Rate System and the Regulation and Forecast of Exchange Rate for Iran's Economy